CP12/32: Implementation of the Alternative ... - BVCA admin

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CP12/32 Implementation of the Alternative Investment Fund Managers Directive Changes for MiFID/UCITS firms Annex X 7.22 The AIFMD conflicts of interest requirements are broadly similar to those already applying to MiFID firms and UCITS management companies. However, the requirements for prime brokers will be new for all full scope UK AIFMs. Compensation 7.23 Article 12(2)(b) of AIFMD refers to the scope of a Member State’s compensation scheme. We will consult on the application of the Financial Services Compensation Scheme to firms affected by AIFMD in CP2. Organisational requirements 7.24 AIFMD aims to ensure that AIFMs operate under robust governance controls and are organised and managed to minimise conflicts of interest between the AIFM and its clients, including AIFs and AIF investors. 7.25 Article 18 of the Level 1 Directive sets out the general principles according to which an authorised AIFM must organise itself effectively. These will be informed by more detailed requirements in the Level 2 Regulation. 7.26 We intend to transpose the Article 18 requirements by integrating them into the existing text in SYSC 4.1. This section of SYSC contains general organisational requirements that apply to most authorised firms, including many of those that will become AIFMs. 7.27 The new rules will require AIFMs to use, at all times, adequate and appropriate human and technical resources necessary for the proper management of AIFs. To ensure this, AIFMs must put appropriate controls and procedures in place, including: • rules for personal transactions and transactions on the firm’s account; • sound administrative and accounting procedures; and • controls and safeguard arrangements for information processing systems. 7.28 In considering what constitutes appropriate human and technical resources for a given AIFM, the FCA will expect the AIFM to take into account the nature, scale and complexity of its business and the types of AIFs under its management in a way which is proportionate. In supervising these requirements, we will expect firms to be able to justify to us the approach they have taken. 7.29 The general organisational requirements closely match those that apply to UCITS management companies and are similar to many of the requirements applying to MiFID 52 Financial Services Authority November 2012
November 2012 CP12/32 Implementation of the Alternative Investment Fund Managers Directive firms. MiFID firms becoming AIFMs will need to check their compliance with the rules on the responsibilities of the governing body, accounting, electronic data processing and record-keeping. Compliance function 7.30 We expect that the Level 2 Regulation will require an AIFM to establish a permanent and independent compliance function commensurate with the size of its business and the types of AIF it manages. We expect that any such requirements will be similar to those contained in the MiFID and UCITS Directives. Such requirements are likely to be new for many other CIS operators becoming AIFMs. 7.31 Respondents to DP12/1 suggested that the following factors should be considered in deciding whether it would be disproportionate to have a separate compliance function: • the number of employees in the AIFM; • the number, size and type of funds under the AIFM’s management; • the number and type of investors; • the complexity of the AIFM’s business model; • whether the AIFM is part of a larger group with a group compliance function; • the extent of leverage in the AIFs; • the volume of transactions; • whether the AIFM operates across several jurisdictions; • the degree of outsourcing; and • whether the AIFM may hold client money. 69 7.32 It remains to be seen whether the Level 2 Regulation permits a firm not to maintain a separate compliance function. Internal audit function 7.33 Respondents to DP/1 suggested that, in deciding whether an AIFM should have a permanent internal audit function, similar factors should be taken into account, as in the decision of whether to have a separate compliance function. One respondent suggested that an AIFM would need a separate compliance function before it needed a permanent internal audit function. 69 Question 11 in DP12/1. Financial Services Authority 53
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Consultation Paper CP12/32 Financia
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Annex 2 List of consultation questi
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Annex 2 November 2012 CP12/32 Imple
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CP12/32 Implementation of the Alter
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ALTERNATIVE INVESTMENT FUND MANAGER
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Annex A Making the Investment Funds
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3.2.5 R An AIFM must, for each AIF
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Page 11 of 91 Appendix 1 (4) the id
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[Note: article 15(1) of AIFMD] this
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(1) a full scope UK AIFM of: (a) a
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Page 17 of 91 Appendix 1 (b) the re
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experienced; Page 19 of 91 Appendix
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Page 21 of 91 Appendix 1 by the fac
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Page 23 of 91 Appendix 1 3.11.5 G T
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(Own funds requirement). [Note: art
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supplements the meaning of financia
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instruments remain in its custody;
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supplementing this section] 4. Comm
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Annex B Amendments to the Glossary
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collective portfolio management fir
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Page 37 of 91 Appendix 1 non-listed
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BIPRU 730k firm Page 39 of 91 Appen
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… Page 41 of 91 Appendix 1 (e) (i
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esources only at excessive cost. Pa
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Single Market Directive … Page 45
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Page 49 of 91 Appendix 1 7.1.7B In
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Page 51 of 91 Appendix 1 [Note: art
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[Note: paragraph 1(c) of Annex II o
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[Note: paragraph 1(k) of Annex II o
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[Note: paragraph 1(r) of Annex II o
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Page 59 of 91 (2) the fixed overhea
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Page 61 of 91 Appendix 1 amount of
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Types of investment firm: BIPRU 50K
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The following text is new and is no
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Page 67 of 91 Appendix 1 (1) at the
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Page 69 of 91 Appendix 1 so that th
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TABLE 7.4 PART I A firm must calcul
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Note consistently in respect of any
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initial capital (see item 5) if the
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Form of qualifying subordinated loa
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Annex H Amendments to the Supervisi
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Descriptio n of data item Annual re
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… Data item SUP 16.12.12R, unless
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indicated otherwise. Data item Firm
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client assets … Page 87 of 91 App
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… Data item SUP 16.12.23R, unless
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FSA066 and FSA06 are added - see fo
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Liquid assets test 32 Liquid assets
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Professional negligence capital req
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is not listed, select ‘Other’.
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FSA067 Capital adequacy - supplemen
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PII capital requirement 5A This is
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External validations Validation Dat
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